The SEC has finally issued proposed rules that would eliminate the prohibition against general solicitation and advertising in Rule 506 offerings. The proposed rules are good news for startups because they offer broader access to investment capital sources, and the SEC should be applauded for its reasoned and reasonable approach in the new rules.
There was a lot of handwringing and blog ink spilled over what the SEC might do with Section 201 of the Jumpstart Our Business Startups Act (the “JOBS Act”). Recall that the JOBS Act directed the SEC to amend Rule 506 of Regulation D to permit general solicitation or general advertising in offerings made under Rule 506, provided that all purchasers of the securities were accredited investors. Section 201 of the JOBS Act went on to require that the SEC’s rules require the issuer to take reasonable steps to verify that the purchasers of the securities were accredited investors, using such methods as determined by the SEC.
I have highlighted some of the most significant quotes and points from SEC Release No. 33-9354 below. Continue reading →